203(k) Home Loans

Buy or refinance a home that needs some work and roll the renovation costs into the mortgage with an FHA 203(k) loan.

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Affordable Financing for Fixer-uppers

An FHA 203(k) loan finances the purchase and renovation of a home. The cost of upgrades are rolled into the mortgage, allowing home-owners to pay for the renovations over time. Since 203(k) loans are insured by the Federal Housing Administration, they offer qualification requirements that aren’t as strict as other renovation loans.

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Although a 203(k) loan has a very specific purpose, it’s still an FHA loan at heart. The minimum down payment for a 203(k) loan is 3.5% for home buyers with a credit score higher than 580 and subject to FHA loan limits. Improvements paid for with a 203(k) generally should be completed by a licensed contractor, are subject to approval by an FHA appraiser and, in some cases, a HUD consultant.

203(k) options

There are two different types of 203(k) loans – limited, sometimes referred to as streamlined, and standard. Both loan types have different rules about how much you can borrow for renovations and what you can do with the money. For example, improvements the FHA deems luxurious generally aren’t eligible for either.

Limited vs. standard

A 203(k) limited loan allows up to $35,000 for renovations, but major structural repairs aren’t eligible. On the other hand, major structural repairs are eligible under a 203(k) standard loan. Renovations must cost at least $5,000 to qualify for a standard loan. Additionally, borrowers must hire a HUD consultant to oversee the renovation process.

Getting started

Renovations financed by an FHA 203(k) loan must be completed within six months. It’s best to start talking to contractors as soon as possible to ensure the project can start shortly after closing.

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Still have questions? Get in touch with one of our experienced mortgage lenders to see if a conventional loan is a good fit for you.

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203(k) Home Loan FAQs

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